Haley Sayres, a San Francisco-based technology analyst, is the prototypical modern-day shopper. She researches purchases online, visits stores to check quality, and uses her mobile phone to compare prices and try to convince sales associates to price match. If an associate won’t negotiate, she’ll go elsewhere or buy online.
One thing that isn’t negotiable for Sayres is the returns process. “I’ll actually buy more if I know there’s an easy and painless returns process,” she says. “Knowing that I can return something easily, whether online or in the store, gives me the confidence to make that initial big purchase.” Sayres points to her experience with online retailers Shopbop, Revolve, and Zappos: “They make it easy — and free — to make returns, so I shop with them frequently, even though they don’t have a physical store.”
But returns don’t have to be this way. Retailers who get the returns experience right can reap rewards in the long term — in reputation, customer loyalty, and sales.
Retail Returns: Friend Or Foe?
Consumer product returns are nothing new, but they amount to approximately 8% of all sales (a whopping $260 billion) — and reach as high as 10% during the holidays.
For retail managers, processing the mountain of returns can seem like a real hassle, not to mention being complicated and costly. What retailers often miss is that the returns process can actually be a unique opportunity to create a more positive brand experience and improve customer loyalty.
But do the benefits from providing a great retail returns experience really make a difference? The short answer is YES. New research from Medallia reveals that customers who have a great returns experience ultimately spend more money and return fewer items in the future.
Proof That The Returns Experience Matters
The way retailers help customers return that $260 billion worth of merchandise can affect trillions of dollars in future revenue. Brands that focus on satisfying customers (people), not just processing returns (products), are making a strategic investment in customer relationships, which are likely to increase customer loyalty and, ultimately, spend.
Customers today use many different channels to shop — in stores, at outlets, online, via mobile apps — and they return more of what they buy. Working with a large retailer, the Medallia Institute found that retail customers who used multiple channels to make a purchase ended up returning nearly one-third more items in the following six months than shoppers who used just one channel. But further analysis revealed that these same customers also spent almost 20% more in those same six months than customers who shopped via a single channel.
Digging deeper into this retailer’s customer experience data, Medallia discovered that regardless of the channel they used, customers who had a very positive returns experience made two more transactions over the following six months, and spent 16% more during that time, than customers who did not have a positive returns experience. Customers with the most satisfying returns experience also ended up returning feweritems: in the same six months, they made nearly 10% fewer returns than customers who had a poor returns experience.
For this large retailer, providing an exceptional returns experience both increased the amount that a customer later spent and decreased the amount that a customer returned.
An academic study of online-only retail returns found similar results: customers who had a positive returns experience in the initial study period (as measured by the speed of their return) ended up buying more than non-returners in the second study period. Like Medallia’s research, the study concluded that returns should not be viewed as just a necessary cost of doing business, but rather an opportunity to “engender repeat and increased purchase behavior.” The opportunity might be even greater for retailers with a brick-and-mortar footprint. Because the majority of returns — even those purchased online — are brought back to a physical store, retailers have yet another opportunity to make a sale then and there.
An Exceptional Returns Experience Is A Differentiator
Big-name companies have made frictionless customer returns a core part of their value proposition. Nordstrom, Zappos and Amazon understand that the returns experience plays a critical role in meeting customer demand. Zappos, for example, has achieved a 75% repeat-buyer rate due in no small part to its seamless returns process.
Similarly, Nordstrom handles returns with “the ultimate objective of making our customers happy.” There are no time limits for returns or exchanges, and if a customer loses a receipt, the company’s POS system finds the necessary purchase information, ensuring a seamless and speedy process. The company is even experimenting with a “Drop & Go” service for online returns at its Nordstrom Rack stores, which allows customers to bypass long lines at the register. This may be one of the reasons that Nordstrom continues to gain market share in a rapidly changing retail environment.
Realizing the opportunity to create new value — for customers and companies alike — innovative start-ups have begun to offer simple return services for online-only retailers. For example, Happy Returns, a Venice, Calif. startup, has placed kiosks at Westfield malls to process returns for pure e-Commerce players, and Saks Off Fifth now accepts returns from the online flash-sale site Gilt Groupe. These new providers recognize the strategic value of getting the returns experience right.
Reaping Rewards From Retail Returns
Nearly every shopper will purchase or receive an item that ultimately needs to be returned. Rather than fret about the costs and complications of dealing with them, retailers should look at returns as an opportunity to engage customers who may be new to their brand. More importantly, a return can be a chance to delight and deepen a retailer’s relationship with customers who have already demonstrated a willingness to open their wallets. If customers have a remarkable returns experience, they very well may keep their wallets open and purchase more.
Don’t let the hassle of restocking an item distract from the value of delighting a customer.
Bernadette Doerr is a Research & Analytics Manager in Medallia's CX Strategy Research group. Prior to joining Medallia, she conducted research on organizational culture and leadership while in the PhD program at the Haas School of Business, and spent the prior decade in strategy consulting.
Dorian Stone leads Insights, Research and CX Strategy at Medallia. Prior to Medallia, Dorian was a partner at McKinsey & Company, where he co-founded McKinsey’s Global Customer Experience practice.
Beth Benjamin is senior director of research at Medallia. She applies organizational science to real-world problems, helping companies adapt to the challenges of growth and market change.